Smart contracts will help investors ensure risks of losses from investing in failed or fraudulent ICOs
According to Luxembourg venture company Mangrove Capital Partners, the average profitability of ICO-project is 1320% annually. It is no wonder that the market is full of ICO projects, which if not scam, they are failing to deliver on their goals and deadlines.
Consulting company Deloitte in their research analyzed the Github code posts and found out that only 8% of the listed projects update their code at least once every half a year. Almost similar results were obtained during the Token Report research, in which 226 ICOs starting from the beginning of 2017 were analyzed. Only 1 of 10 projects was able to develop a product and use their tokens internally. The rest, 90% of the tokens, are just listed on the exchange and are used for speculation.
Decentralized platform Descrow has developed a solution that minimizes investor and ICO participants risks and insures against the full loss of investments put in the failed project.
Descrow offers the platform for ICO launch, where smart contracts are moderating interactions between investors and ICO projects. Participants, who would like to invest in one of the projects listed on Descrow platform, decide on the number of tokens they would like to buy and pay for it.
But the funds are not directly transferred to be in the full control of the startup project team, contrary to the current market practice. ICO team will only receive the part of funds necessary to start development, while the rest of funds will wait in the frozen state. If the investor for any reasons would like to stop financing the project, the frozen funds will be returned.
The investor has not only the opportunity to return frozen funds, but also receive a full compensation of the initial transfer. In this case, the standard compensation amount is 30% of the payment.
Investors can also receive the full amount guaranteed compensation of the initial payment. For that, the option of indemnification is available for purchase. This contract puts an obligation to pay the 100% compensation on Descrow platform. The premium for such an insurance against losses from participation in failed projects will be calculated individually with a minimum premium of 5% of the payment.
The compensation will be transferred from the Descrow reserve fund, which is fueled from several sources, including the commission from ICO projects listed on the platform and raised during ICO Descrow funds.